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Spending on Marketing Analytics

I added a special section focusing on marketing analytics to the February 2012 issue of The CMO Survey. With all the talk about “big data” and the billions of dollars companies appear to pouring into capturing, processing, and leverage customer data, I thought it would be a good idea to examine where companies are on a few key issues and also where they expect to be over time on this strategic investment.

I asked top marketers to report what percentage of their marketing budgets they spend on marketing analytics. I think this is a reasonable request given that 70% of all top marketers state that the marketing analytics group reports to them. Results indicate that companies currently spend an average of 5.7% of their marketing budgets on marketing analytics and that this number is expected to grow to 9.1% in the next three years. This 60% increase represents a sizable shift. To put it in perspective, marketing budgets overall have grown 8.3% over the last two years. This growth varies by company size and industry sector. Looking at Table 1, we can see that, in general, current marketing analytic spending levels and expected growth levels correlate with company size (measured as revenues). There is a trough near the middle for companies between $500M-$999M, but otherwise the relationship is positive and significant. Examining sector differences in Table 2, we see that services companies, overall, spend more on marketing analytics now and will remain ahead of product companies in the next three years. From these figures, service companies appear to understand the “big data” opportunity and believe they can leverage it to create more value for their customers.

Table 1. Spending on Marketing Analytics by Company Size (in sales revenues)

Table 2. Spending on Marketing Analytics by Sector

I also asked top marketers to report on the number of company employees dedicated to marketing analytics currently and what they expect in three years. Results indicate that companies currently employ, on average, 5.8 people and expect this number to increase to 6.9 people. This increase reflects a 19% increase. Compared to the 60% increase we observe in spending on marketing analytics, these results tell us that firms will spend more on systems than on people during this big data boom. Human capital will grow, but it will grow less than the capital investments companies are going to make in marketing analytic systems. I predict that if I continue to ask these questions over time, this emphasis will shift. That is, once companies have systems in place, the key element will be people who can manage and leverage these systems in strategy decisions.

It’s also interesting how company size (in terms of revenues) is related to these hiring levels. Looking again at Table 1 but especially at the last two columns, we see very little difference in company expenditures until we hit the $1B mark at which point the average jumps from ~1.3 people up to 9.1 people for companies with $1B-9B in sales and then to an astonishingly high level of 26.4 people! Examining sectors, we see that product companies, overall, have dedicated more human capital to marketing analytics than service companies! This difference dissipates some in the next three years. Let me therefore revise my hypotheses about service companies appearing to understand the “big data” opportunity and believe they can leverage it to create more value for their customers. Instead, it appears that service companies might be playing catch up on systems whereas product companies are fine –tuning the human element of the marketing analytics equation. This later theory appears more valid given that product companies also appear to use marketing analytics in a greater percentage of their projects. Look at Table 3. There we see that B2C product companies in particular beat the rest of the sectors in the use of marketing analytics to drive decisions. I’ll return to this topic in my next blog—stay tuned.

Table 3. Use of Marketing Analytics by Sector

  1. Jeff Kingman says:

    Excellent. Thank you.

  2. Christine Moorman says:

    Thanks Jeff. More to follow on this topic over the next few months. I’ve been in my heavy teaching period for the last six weeks but will begin my regular blogging very soon. Best. Chris

  3. Ali Tadlaoui says:

    Very interesting information and perspective. The human element of the marketing analytics equation is of particular interest to me as I work in marketing capability development, in which change management is a key activity. Embedding marketing analytics, I think, in a company’s ways of working at the individual level requires attitude and behavior change, and will therefore continue to be one of the challenges to truly benefitting from Big Data. Looking forward to more posts on this topic.

    Ali Tadlaoui (Fuqua ’86 and Marketing Workbench Lab w/J. McCann)

  4. Christine Moorman says:

    Thanks for the comment, Ali. Agreed on the criticality of the human element. Marketing analytics will not be a force for effective strategy unless is it built into capabilities and derived from the human capital that drives organizations. Most fundamentally, marketing analytics must be trusted as a source of objective information to guide key strategic decisions in the company. The Marketing Workbench lab was a great inspiration for me when I was a Ph.D. student. John is a good friend and colleague.

  5. Christine, great article, it lends itself for a great discussion. Here are my thoughts. Great analytics stems from a great analyst who is able to take ownership on the skillset he/she needs and to solve for data and process gaps across the company. Usually average tools are not a limiting factor to great analytics (however they can be to a complete CRM solution). It is interesting how investment on analytics changes by company size. Not only a strong analyst is hard to find, but can be expensive. A small company tends to hire mediocre analysts and invest in tools to achieve economies of scale, but is should be the other way around. A large company that finds the right person to lead analytics benefits from key tactical and strategic indications that return a sizable ROI, therefore it is more likely to invest following the directions of its analytics leader.

  6. Clayton says:

    Excellent articles.
    Its incredible how traditional Marketing managers become afraid when facing true info provided by analytcs .
    The key issue for us (owner of Analytic Marketing Consulting Company) is to convince them that is worthwhile to invest on Analytcs. Off course waste money on non efficient campaigns is not an issue as long as nobody discover it.

  7. Christine Moorman says:

    Excellent points. Sorry for the delay in responding and publishing your remarks.

  8. I find this all encouraging news- more accountability and transparency helps demonstrate of the performance of marketing teams.

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